She said the commission's decision was a "clear message to member states that they cannot give unfair tax benefits to selected companies".

In its investigation, opened in 2014, the commission looked at how Apple reported its profits between two companies it set up in Ireland - Apple Sales International and Apple Operations Europe.

The US giant "endorsed a split of the profits for tax purposes in Ireland", the commission explained in a statement.

"Under the agreed method, most profits were internally allocated away from Ireland to a 'head office' within Apple Sales International. This 'head office' was not based in any country and did not have any employees or own premises," the commission said.

"Only a fraction of the profits of Apple Sales International were allocated to its Irish branch and subject to tax in Ireland. The remaining vast majority of profits were allocated to the 'head office', where they remained untaxed."

As a result, Apple's tax rate on its profits was only 0.05 percent in 2011 and 0.005 percent in 2014.

EU member states have the right to set their own level of taxation, Vestager said, but Apple was "very very far away" from the normal 12.5 percent Irish corporate tax.

It will be up to Irish authorities to determine the exact amount and methods of repayment.

The commission said other countries might now look at the firm's dealings and decide it should have paid taxes in their jurisdictions.

"That would reduce the amount to be paid back to Ireland," Vestager said.

Immediately after Vestager's announcement, the Irish government said it would appeal to the European Court of Justice.